Japanese institutions make up just 5.2% of stock transactions

Japanese financial institutions accounted in May for a meagre 5.2% of transactions in the country’s publicly quoted stocks, according to figures compiled by the (subscription only) Nikkei newspaper from data made available by the Tokyo Stock Exchange.

As previously noted in this blog, the TSE does not log who owns shares, only who has custody of them. So the Nikkei may have needed the co-operation of trust bank custodians in identifying the transacting parties.

The newspaper’s analysis pegs the level of trade by foreigners at 71.2% — compared with the less than 50% to which it plunged following the 2008 financial crisis — and by domestic individuals at 18.5%

Publication of the figures follows a new report from information technology research and consulting firm Celent on How to Trade in Japan: A User’s Guide to Japan’s Capital Markets. Its author, Neil Katkov, notes that:

 “With high frequency trading strategies nearing 20% of equities volumes, it is only a matter of time for Japan to reach the advanced execution levels that characterize a fully modern market.”

Optimists have been saying this sort of thing about Tokyo for decades but so far it has never managed to catch up with its brethren.

A commentary in The Trade News Asia on the Celent report notes that “Japanese markets have been suffering for years from falling volume and prices, partly due to a lack of retail investor participation; something Katkov believes needs to be addressed in order to inject some vitality.

However if the Nikkei is right that institutional volumes are now at their lowest in “about 28 years”, then Celent may  be looking in the same old places for the causes of Japan’s lack of dynamism and the problem is much worse than has previously been thought.

© 2012 Japan Pensions Industry Database/Jo McBride. Reporting on, and analysis of, the secretive business of Japanese institutional investment takes commitment, money and time. This blog is one of the products of such commitment. It may nonetheless be reproduced or used as a source without charge so long as (but only so long as) the use is credited to www.ijapicap.com.

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